Cross-IFRS · Case studies (Step 3 of 5)
Practical case
Corvelle Group SA, a fictitious industrial services company (320 employees), IFRS consolidated financial statements, year end 31 December, amounts in euros.
L1 · Guided · Year N — 1 October
You follow the sale of 45 points of Mervane SA, which makes the group lose control but leaves it a 30 % interest with two board seats. For each item, two questions: which standard does it fall under, and what is its effect on profit or loss and on the value of the investment? All amounts are case data. Teaching assumption: income tax effects and transaction costs are ignored and the 30 % interest is judged to give significant influence (judgement, 20 % presumption not rebutted).
Classify the items of the transaction and deal with the retained interest.
Fundamental level: the method, help and references are shown.
Method
File checklist
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Context · Dated fact of the file
Corvelle Group SA, a fictitious industrial services company (320 employees), IFRS consolidated financial statements, year end 31 December, amounts in euros.
Initial event · L1·Year N — 1 October · Current stage
Classify the items of the transaction and deal with the retained interest.
Pieces added
New information · L2·Year N — 1 October · Upcoming: unlocks after the current stage
New period · L3·Year N — 31 December · Upcoming: unlocks after the current stage
New period · L4·Year N — closing · Upcoming: unlocks after the current stage
Conclusion · Upcoming: unlocks after the current stage
1 document to work from at this level.
Document 1Supporting document
| Item (case data) | Information |
|---|---|
| Subsidiary | Mervane SA (fictitious company), 75 % held by Corvelle Group SA; non-controlling interests: 25 % |
| Sale | on 1 October N, Corvelle sells 45 points to Tolbek Capital, an unrelated third party, for EUR 1,350,000 in cash, under a single contract; it keeps 30 %, two board seats and participation in policy decisions |
| Mervane's assets (goodwill included) | EUR 3,800,000 |
| Mervane's liabilities | EUR 1,000,000 |
| Non-controlling interests (carrying amount) | EUR 700,000 |
| Retained 30 % interest | fair value EUR 900,000; carrying amount of the retained share EUR 840,000 |
| Accumulated other comprehensive income | reclassifiable translation difference of EUR 40,000, attributable to the owners of the parent (case convention, teaching assumption); the share of the non-controlling interests is already included in their EUR 700,000 |
| After 1 October (equity method) | adjusted profit of the 4th quarter EUR 200,000; other comprehensive income EUR 20,000; dividend received by Corvelle EUR 15,000 |
First level: all the data is in the brief and the pieces of this level.
2 parts to answer, marked when you submit the level.
Find the useful facts in the pieces before concluding.
Part 1 · Classification · Recognition
Classify each item according to the standard that governs it.
Drag each item into its category, or tap the category under the item.
Derecognition of Mervane's assets, liabilities and goodwill from the consolidated balance sheet
Derecognition of the carrying amount of the non-controlling interests
Gain or loss on the loss of control, with the part relating to the retained interest
Corvelle's share of Mervane's profit after 1 October
Dividend received from Mervane after 1 October, which reduces the carrying amount of the investment
1 more question will appear once the current question is complete.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Answer every part to submit the level and see the conclusion.
Normative references